Thames Water Utilities Ltd. announced a plan on Friday to raise up to £3 billion ($3.9 billion) from its creditors, aiming to secure additional time to prevent entering special administration early next year.
As the UK’s largest water and sewage provider, Thames Water has proposed an agreement that would allow it to borrow more funds and extend existing debt due for repayment next year.
Furthermore, the company seeks to access its cash reserves to avert a potential depletion of operating capital by the end of December.
Should restructuring and new funding fail to materialise, the heavily indebted utility could face temporary nationalisation. Existing investors are keen to avoid this scenario, as prolonged government control may result in lower recoveries of their loans.
The proposal includes plans to secure up to £3 billion in super senior funding, commencing with an initial tranche of £1.5 billion, thereby extending its liquidity until October 2025.
The beleaguered utility reports that the plan has garnered support from creditors holding approximately £6.7 billion of its £15 billion debt. Most of these creditors are associated with the more senior-ranked Class A debt.
“Today’s news demonstrates further progress to put Thames Water onto a more stable financial footing as we seek a long-term solution to our financial resilience,” said Thames chief executive Chris Weston.
Time is of the essence for Thames Water, as it awaits a critical decision from the regulator Ofwat concerning the industry’s price controls for the next five years, including the rate of return for investors.
This decision, originally slated for December 19, may be postponed into January due to delays caused by this year’s UK election.
Under the proposal submitted on Friday, Thames Water may extend the maturities of some existing debts to May 2026 if it opts to appeal to the Competition and Markets Authority regarding Ofwat’s final determination. In such a case, it could access an additional £1.5 billion in two £750 million tranches.
While the proposal has the backing of Class A creditors, a separate group holding Thames Water’s riskiest debts has drafted alternative plans to provide the utility with a loan of at least £1.5 billion ($1.9 billion), as reported by Bloomberg on Thursday.
Ofwat welcomed Thames’ proposal, describing it as a “positive step towards extending its liquidity runway and seeking a market-based solution to the company’s problems.”
They further assured that “safeguards are in place to ensure that services to customers are protected, regardless of the issues faced by Thames Water.”
